I. Economic data

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A. Macro-economic data

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- General data[1]

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Population 2023: 335,967,996[2] inhabitants

Area: 9,833,517 km2

Density (2021): 36.30 inhabitants/km2[3]

GDP (nominal) 2022: $25,439 billion (1st)

GDP/capita 2021: $63,700

GDP (PPP) 2021: $21,132 billion (1st)

GDP (PPP)/capita 2021: $76,329.6 [4]

Growth rate 2021: 5.9%

GNI/capita (PPP) 2022: $77,950 [5]

HDI 2021: 0.921 (4th)

Literacy rate: 99%

Life expectancy 2023: 80.8 years

 

- Policy

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The United States is a constitutional federal Republic. Power is divided between the federal government and the 50 states.

 

The U.S. Constitution guarantees its citizens’ fundamental rights. There are two main political parties in the USA: the Democratic Party and the Republican Party.

 

Legislative power is in the hands of Congress, which is made up of the House of Representatives (435 seats) and the Senate (100 seats).

 

At the time of writing, Joseph R. Biden, Democrat, has been the President since January 20, 2021. The Vice President is Kamala D. Harris. The next elections will be held on November 5, 2024.

 

- Economic development[6]

 

As the world's leading power, the USA is a member of most major international organizations such as the OECD, the G7, the WTO and the Asia-Pacific Economic Cooperation (APEC). At regional level, the USA is a member of the North American Free Trade Agreement (NAFTA).

 

The growth rate in the USA doubled in the third quarter of 2023 compared with the second quarter, reaching 4.9%.

 

The US inflation rate was 4.7% in 2021 and remained below 5% in June 2023[7]. Unemployment was 5.46% in 2021, and among young people (aged 15 - 24), it was 9.6% for the same period.

 

- Resources

 

The USA's natural resources are mainly mining (copper, gold, iron, mercury, lead, silver, zinc, coal), hydrocarbons (natural gas, oil) and industrial (high-tech, uranium, automobiles)[8].

 

The USA holds the world’s largest coal reserves with 491 billion tonnes (27% of the world total)[9].

Services account for 80% of the country's GDP. Industry accounts for 19.1% of GDP and agriculture for 0.9%[10].

 

- Population

 

The urban population represents 83.3% of the total population in the USA[11].

 

In 2023, the five most populous States in the USA were California (38,965,193), Texas (30,503,301), Florida (22,610,726), New York (19,571,216) and Pennsylvania (12,961,683)[12].        

 

USA’s ten most populous cities are New York (8,804,190), Los Angeles (3,893,986), Chicago (2,747,231), Houston (2,302,792), Phoenix (1,607,739), Philadelphia (1,603,797), San Antonio (1,434,270), San Diego (1,385,922), Dallas (1,304,442) and San José (1,014,545).[13]

 

- Foreign investment[14]

 

In terms of exports, the USA's main partners are Canada (16% of exports), Mexico (15%), China (9%), Japan (4%) and South Korea (4%).

 

As for imports, the USA’s main partners are China (19%), Mexico (13%), Canada (13%), Germany (5%) and Japan (5%).

 

Foreign direct investment inflows to the USA reached $367 billion in 2021. The states that received the most investment in 2021 were California, followed by Massachusetts and New York[15].

 

B. Economic data specific to franchising

 

- Historical background

 

The USA is often referred to as the birthplace of franchising, alongside France. Franchising first appeared in the USA at the beginning of the 20th century. During the Great Depression of 1929, General Motors set up the first franchise system as we know it today. General Motors contracted with independent dealers, granting them its licenses[16].

 

- Institution

 

The franchise sector is organized under the International Franchise Association (IFA)[17], founded in 1960. The IFA is the world's oldest franchise association[18].

 

- Trade shows [19]

 

Every year, the IFA organizes the IFA annual convention. The show is usually held in February. For 2024, the show was held from February 17 to 20, 2024 in Phoenix.

 

The International Franchise Expo, which expects to see investors from all over the USA and more than 80 countries, will be held in New York from May 30 to June 1, 2024.

 

For franchisors looking to expand or those interested in starting a franchise in the USA, the IFA has set up the Emerging Franchisor Conference, November 18-20, 2024 at the JW Marriott Downtown, Austin TX.

​

The IFA also organizes several regional trade shows:

 

-Franchise Expo West, a franchising trade show located in the Western USA, will be held on April 12 and 13, 2024 in Los Angeles;

-Franchise Expo South, will be held on September 6 and 7, 2024 in Fort Lauderdale and is focused on franchising in the Southern USA, the Caribbean and Latin America;

-Franchise Expo Austin, dedicated to the franchise sector in the Greater Austin area, will be held on November 15 and 16 at the Renaissance Austin Hotel.

 

- Statistics[20]

 

In 2022, there were 792,014 franchised establishments in the USA. There are over 3,000 unique franchises in the USA, and on average, 300 franchised businesses are created every year.

 

The three sectors with the most franchised establishments are fast food (192,146 establishments), retail sale of food, products and services (165,955) and personal services (117,594)[21].

 

The biggest business sector is fast food, which represents a $276 billion market.

 

Texas is the State with the highest increase in franchised establishments in 2022, rising 3.7% between 2021 and 2022. The Southern region has the highest concentration of franchises in the USA, with 231,500 locations[22].

10% of all American businesses are franchises.

 

The average age of a franchisee is 44.

 

19% of franchisees work in the hotel industry, 14% work for public companies, 11% work in manufacturing sector and 9% work in retail.

 

20% of independent businesses close after two years. In the case of franchises, 92% are still in business two years after opening[23].

 

- Contract content

 

Franchise contracts last an average of 10 to 20 years. Typically, the royalty percentage is 5-6%[24].

 

The initial investment to buy a franchise varies according to the sector concerned and the type of franchise. Costs can vary from $20,000 to over $1 million[25].

 

- Economic impact

 

The franchise sector generated $826.6 billion, or 3% of GDP, and employs more than 8.5 million people[26].

 

- International

 

80% of franchises in the USA are local or regional brands. 16% of franchises are national or global[27].

Internationally, 57% of franchise brands originate in the USA[28].

 

II. Legal information

 

A. Legal information directly related to franchising

 

- Applicable legislation

 

The IFA has adopted a code of ethics designed to provide a framework for good practice in the franchisor/franchisee relationship. The code's preface expressly states that it is not intended to be enforced by the courts.

 

Franchising is regulated at federal level by the Federal Trade Commission's Trade Regulation Rule on franchising[29], or "FTC Franchise Rule" for short, which contains provisions on pre-contractual information for prospective franchisees. The Federal Trade Commission (FTC) monitors compliance with the FTC Franchise Rule[30].

 

In addition, several federal States have enacted laws governing pre-contractual information and/or the franchisor/franchisee contractual relationship. For example, California, Hawaii, New York and Washington have all passed federal franchise legislation.[31]

 

There are two types of franchises: distribution franchising, which does not involve the communication of know-how, and Business format franchising, which involves the transmission of know-how[32].

 

Franchise agreements in the USA are also subject to US contract law, so contractual good faith applies.

In practice, franchise agreements are written, even if this is not expressly stated in the FTC Franchise Rule.

 

- Pre-contractual information

 

Franchisors must provide a pre-contractual disclosure document (known in the U.S. as an "FDD", franchise disclosure document) containing, among other things, information on[33]:

​

- the franchisor and its predecessors (including the company's structure and management, and its history of litigation and bankruptcy);

- key people in the franchisor's company;

- management experience;

- entrance fees (initial fees) and royalties;

- investments and purchases required;

- land rights;

- potential income;

- restrictions on what the franchisee can resell;

- franchisor and franchisee responsibilities;

- contract renewal, contract termination and dispute resolution;

- franchisees already in the network and those who have left;

- contracts.

 

This document must be given to the prospective franchisee fourteen days before signing the franchise agreement or making any franchise-related payment. Candidate franchisees must sign a receipt certifying that they have received the FDD.

 

Federal law does not require FDD registration. However, some States, known as "franchise registration States", have set up a system for registering FDDs with a local regulator. These States are: California, Hawaii, Illinois, Minnesota, Indiana, Maryland, Michigan, New York, North Dakota, Rhode Island, Virginia, Washington and Wisconsin[34]. The States where franchises are registered have a local regulator who examines whether the FDD complies with the regulatory requirements of the State in question, and the financial state of the franchise. Finally, the local regulator may make the FDD's registration conditional on compliance with local financial insurance requirements.

 

In addition to franchise registration States, there are also "franchise filing States". These States are: Connecticut, Florida, Kentucky, Nebraska, North Carolina, South Carolina, South Dakota, Texas, Maine and Utah[35]. These States require franchisors to file the FDD with the State concerned. The State will issue an opinion, but the FDD will not be reviewed. In addition to the ten franchise filing States mentioned above, Georgia and Louisiana are also included when the franchisor has not filed a federal trademark. [36]

 

State laws on pre-contractual information for prospective franchisees may differ in terms of content and time frame.

 

Federal law provides for a number of exemptions from the obligation to provide pre-contractual information. This is also the case for certain State laws. Nevertheless, an exemption provided for by a State law does not dispense with the federal obligation to provide information.

 

The Federal Trade Commission can take legal action against a franchisor who is in breach of the pre-contractual disclosure obligation. The courts can order franchisors to comply with their obligation. In addition, certain State laws impose criminal penalties for breaches of pre-contractual disclosure obligations.

 

- Jurisdiction and applicable law

 

The USA has ratified the New York Convention[37] facilitating the recognition and enforcement of foreign arbitral awards.

 

The USA has also ratified the Vienna Convention on Contracts for the International Sale of Goods[38]. This Convention has been signed by 89 countries and applies exclusively to contracts for the sale of goods for professional use (Article 2 of the Convention). Only the rights and obligations of the seller and buyer under the international sales contract, and its formation, are governed by this Convention. The Vienna Convention supersedes national law when the parties have their place of business in States party to the Convention.

 

- Trademarks

 

Trademark protection is governed by the Lanham Act[39].

 

Ownership of the trademark is granted to the first user of the trademark, not to the person who first filed the application for registration[40]. The federal government has jurisdiction over intellectual property. Protection is therefore granted throughout the country[41].

 

Application for registration is made to the USA Patent and Trademark Office[42]. The application may require the assistance of an American attorney.

​

Once registered, the trademark is protected for a renewable period of 10 years[43].

 

The trademark is protected against unauthorized use of an identical or similar trademark likely to cause confusion, error or deception. Victims of trademark infringement can obtain injunctive relief, damages, the allocation of profits derived from the unlawful use of the trademark by its author, as well as the reimbursement of costs incurred and lawyers' fees.

 

As the USA is a member of the Madrid System, a U.S. trademark can be registered internationally.

​

In the USA, trademark applications can be handled both nationally and through the WIPO system, and they undergo examination. The USA allows multi-class trademark registrations.Trademarks must be actually used in US commerce.To develop a franchise in this country, it is advisable to cover class 35 knowing that "Business assistance relating to franchising" are accepted as business management advisory services relating to franchising. "Retail services" are also accepted in class 35, specified as retail store services featuring particular goods. Regarding the franchising agreement's recordal, it is not compulsory, although a license agreement can be recorded and advised.

​

B. Peripheral legal data

 

- Competition law

 

US antitrust law applies to franchise agreements. Antitrust laws such as the Sherman Act[44], the Clayton Act[45] and the Federal Trade Commission Act[46] aim to prevent anti-competitive practices (cartels and abuse of dominant positions).

 

Franchise agreements are mainly liable to provide for vertical restraints, which are governed by the Sherman Act. As restrictions, their validity under competition law is subject to the "rule of reason": an agreement restricting competition will not be forbidden if it has positive effects which advantageously offset any negative effects.

 

The Sherman Act prohibits horizontal agreements that fix, stabilize or manipulate prices in such a way as to hinder competition.

 

In addition to federal antitrust laws, some States have federal laws that may apply to franchise relationships, and franchisors must therefore pay close attention to these laws when setting up their network in the States concerned.

 

Enforcement is carried out primarily through civil and criminal actions brought by the Department of Justice's Antitrust Division. The Federal Trade Commission[47] is responsible for enforcing competition law.

 

- Personal data

 

In the USA, there are several federal laws regulating data protection. The most important federal laws are:

 

- The Privacy Act of 1974[48], which applies to federal government agencies and regulates the collection, use and disclosure of personal information held by these agencies;

 

- The Health Insurance Portability and Accountability Act (HIPAA) of 1996[49], which applies to entities in the healthcare sector (healthcare providers, health insurance companies, healthcare service providers). The Department of Health And Human Services (HHS) is responsible for regulating HIPAA;

 

- The Gramm-Leach-Bliley Act[50], which applies to financial institutions and companies offering financial products or services concerning customers' non-public personal information. The Consumer Financial Protection Bureau (CFPB) regulates consumer protection in the financial services sector;

 

- The Children's Online Privacy Protection Act[51], protects children's online privacy and regulates the collection of personal information from children under 13.

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Federal States can also pass their own laws, as California has done, adopting one of the country's strictest data protection laws: the California Consumer Privacy Act[52]. The State of California has also set up the California Privacy Protection Agency (CPPA) to monitor compliance with this law.

​

These various laws set out major principles, such as the principle of transparency and notification, the consent of the data subject, the security of collected data, and the rights of data subjects (right of access, right of rectification or right to erasure).

 

- Special provisions for foreign investments

 

Foreign investments are subject to a number of controls and reporting obligations at both federal and state level, particularly with regard to national security.

 

In principle, foreign companies are treated in the same way as local companies[53]. However, under the International Investment and Trade in Services Survey Act[54], foreign investors are subject to reporting and disclosure requirements. A baseline survey of foreign direct investment will then be carried out.

 

The Foreign Investment Risk Modernization Act[55] of 2018 (FIRRMA) strengthened the powers of the Committee on Foreign Investment in the USA (CFIUS)[56]. This is an interagency committee empowered to assess the national security implications of foreign investment in the USA[57].

 

Useful websites :

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-Government statistics: https://www.census.gov/;

-Legislation: https://www.congress.gov/;

-Intellectual property: https://www.uspto.gov/;

-The International Franchise Association: https://www.franchise.org/;

-Federal Trade Commission: https://www.ftc.gov/;

-U.S. Treasury Department: https://home.treasury.gov/;

-World Bank: https://www.banquemondiale.org/fr/home.

​

​

[1] Unless otherwise stated, the data below are from https://www.cia.gov/the-world-factbook/countries/united-states/

[2] https://www.census.gov/topics/income-poverty/income.html

[3] https://perspective.usherbrooke.ca/bilan/servlet/BMTendanceStatPays?codePays=USA&codeStat=EN.POP.DNST

[4] Source: World Bank data

[5] Ditto

[6] Unless otherwise stated, information from https://www.cia.gov/the-world-factbook/countries/united-states/

[7] https://www.diplomatie.gouv.fr/fr/dossiers-pays/etats-unis/presentation-des-etats-unis/

[8] https://www.larousse.fr/encyclopedie/divers/%C3%89tats-Unis_activit%C3%A9s_%C3%A9conomiques/186939#:~:text=The%20%C3%89United%2States%20have%20copper%20(2nd%20rank).

[9] https://www.cia.gov/the-world-factbook/countries/united-states/

[10] Ditto

[11] Ibid

[12] https://www.census.gov/newsroom/press-releases/2023/population-trends-return-to-pre-pandemic-norms.html

[13] The ranking comes from Wikipedia, based on https://www.census.gov/data/tables/time-series/demo/popest/2020s-total-cities-and-towns.html

[14] Unless otherwise stated, the information below is taken from https://www.cia.gov/the-world-factbook/countries/united-states/#government

[15] https://www.btrade.ma/fr/observer-les-pays/etats-unis/investir

[16] https://www.franchise-fff.com/decouvrir-la-fff/histoire-de-la-franchise-et-de-la-fff/

[17] 1900 K Street, NW, Suite 700, Washington, DC 20006, e-mail: Info@franchise.org, tel: 202 628 8000

[18] https://www.sourcewatch.org/index.php/International_Franchise_Association

[19] The following information is taken from https://www.franchise.org/events

[20] Unless otherwise stated, the data below are from https://www.webfx.com/industries/franchises/statistics/

[21] https://www.franchise.org/sites/default/files/2022-02/2022%20Franchising%20Economic%20Outlook.pdf

[22] Ditto

[23] https://franchise.neighborly.com/how-this-works/franchising-statistics/

[24] https://www.webfx.com/industries/franchises/statistics/

[25] https://www.franchise.org/faqs/finance/how-much-money-do-i-need-to-buy-a-franchise

[26] https://www.franchise.org/sites/default/files/2022-02/2022%20Franchising%20Economic%20Outlook.pdf

[27] https://www.webfx.com/industries/franchises/statistics/

[28] https://gitnux.org/franchise-statistics/

[29] N°16 CFR Parts 436 and 437

[30] https://www.franchise.org/faqs/legal/what-is-the-ftc-franchise-rule

[31] https://www.franchiselawsolutions.com/franchising/state-specific-laws/

[32] https://www.franchise.org/faqs/what-are-common-franchising-terms-and-definitions

[33] https://www.franchise.org/faqs/what-information-does-a-franchise-disclosure-document-fdd-contain

[34] https://www.franchiselawsolutions.com/franchising/state-specific-laws/

[35] Ditto

[36] https://www.franchiselawsolutions.com/learn/franchise-compliance/the-franchise-registration-states

[37] 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards

[38] United Nations Convention on Contracts for the International Sale of Goods signed at Vienna on April 11, 1980

[39] N°15 U.S.C §1127

[40] https://www.law.cornell.edu/wex/lanham_act

[41] https://www.transatlantic-lawyer.com/fr/deposer-une-marque-aux-usa-tout-savoir/

[42] P.O. Box 1450 Alexandria, VA 22313-1450Tel: 800-786-9199 (press 1), e-mail: TrademarkAssistanceCenter@uspto.gov

[43] https://frenchdistrict.com/articles/marques-brevets-etats-unis-copyrights-protection-droits-lois/

[44] 15 U.S.C §1-7

[45] 15 U.S.C. §12-27 and 29 U.S.C. §52-53

[46] 15 U.S.C. §41-58

[47] 600 Pennsylvania Avenue, NW Washington, DC 20580, tel: (202) 326-2222, e-mail: antitrust@ftc.gov

[48] Latest amendment: 5 U.S.C. §552 a

[49] Public law n°104-191

[50] Public law n°106-102, 113 Stat.1338

[51] Last amendment 15 U.S.C. 6501-6508

[52] https://oag.ca.gov/privacy/ccpa

[53] https://www.franchise.org/sites/default/files/2022-08/2023%20Franchise%20-%20USA.pdf

[54] N° 22 USC § 46

[55] N°H.R.5841

[56] CFIUS@treasury.gov, tel: (202) 622-1860

[57] https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius/cfius-overview